INTRODUCTION:

The modernisation of business activities is one of the consequences of rapid economic growth in Nigeria. These transformed business activities often give rise to disputes that require speedy and amicable settlement. The cardinal issue is usually how these disputes can be resolved between parties and customer/clients when they occur in a way that the relationship between them is not adversely affected. The quest to sustain business relationships and get justice swiftly administered gave rise to arbitration and other Alternative Dispute Resolution (ADR) mechanisms.
Arbitration has become an important mechanism for resolving commercial disputes in Nigeria. Its attraction lies in party autonomy, procedural flexibility, confidentiality, and the relative speed with which disputes are determined outside the traditional court system.

The voluntary nature of arbitration ensures that parties freely consent to resolve their disputes out of court by embedding a binding arbitration clause in their agreement. As a result, parties must refer their dispute to arbitration first, effectively granting the tribunal sole competence over the matter. Where the arbitration agreement is valid and enforceable, a court before which an action is brought, and which is the subject of an arbitration agreement, is empowered to stay such proceedings and refer the parties back to arbitration. While standard model arbitration clauses broadly encompass ‘any and all disputes’ arising from a contract, they cannot bypass limitations established by extant laws in Nigeria. Under Nigerian law, public policy overrides absolute contractual language. Consequently, even if a commercial dispute triggers an all-inclusive clause, matters involving criminal allegations (such as fraud), statutory tax liabilities, or matrimonial status remain strictly non-arbitrable and fall exclusively within the jurisdiction of the courts.

Arbitrability refers to the legal capacity of a dispute to be determined by arbitration, as opposed to being reserved exclusively for adjudication by the courts. It operates as a threshold inquiry distinct from the validity of the arbitration agreement itself. Even where parties have validly agreed to arbitrate, a dispute may still be non-arbitrable if its subject matter falls within a category that the law, on public policy grounds, withholds from private dispute resolution.

Nigerian courts have continued to play an important role in identifying the boundaries of arbitrability through statutory interpretation, public policy, and judicial precedent, as there is no single codified provision that exhaustively distinguishes all arbitrable from non-arbitrable disputes in the legal framework governing arbitration in Nigeria.

This article examines the legal framework, mapping the categories of disputes such as contractual, construction, commercial, intellectual property matters, amongst others, that are generally arbitrable, against those that are not, including criminal matters, matrimonial and status-related disputes, tax liabilities, winding-up and insolvency proceedings, election petitions, and judgments in rem. In doing so, the writers argue that the decisive question in every case is not the label attached to the dispute, but the nature of the right in issue and the relief(s) sought, whether the parties can lawfully compromise that right, and whether an arbitral tribunal can determine it without exercising a power the Nigerian law reserves to a court or other public authority.

THE ARBITRATION AND MEDIATION ACT, 2023:

The Arbitration and Mediation Act (AMA) 2023 represents a significant development in the practice of alternative dispute resolution in Nigeria. Among other things, it strengthens the arbitration framework through provisions dealing with arbitration agreements; court referral to arbitration; tribunal jurisdiction; interim measures; appointment and challenge of arbitrators; conduct of proceedings; challenge of arbitral awards; recognition and enforcement of arbitral awards; and international arbitration. The Act expressly focuses on commercial disputes. Section 91 of the Arbitration and Mediation Act, 2023 describes the term commercial to include;

“matters arising from all relationships of commercial nature whether contractual or not, such as any trade transaction for the supply or exchange of goods or services, distribution agreement, commercial representation or agency, factoring, leasing, construction works, consulting, engineering, licensing, investment, financing, banking, insurance, exploitation agreement or concession, joint venture and other forms of industrial or business co-operation, carriage of goods or passengers by air, sea, rail or road.”

This broad commercial scope means that the ordinary presumption in Nigeria is generally in favour of arbitration where the dispute is contractual or commercial and legally capable of settlement by agreement.

THE GENERAL TEST FOR ARBITRABILITY:

Arbitrability must be distinguished from the validity and existence of the arbitration agreement. There is no generally accepted position with regard to disputes that are arbitrable and those that are not. The paramount consideration is usually whether the issues in contention are such that they are not contrary to public policy and can be settled by way of arbitration in line with the law applicable to the arbitration agreement.
The traditional Nigerian judicial approach can be traced back to the case of K.S.U.D.B. v. Fanz Const. Ltd, where the Supreme Court held that:

“The dispute or difference which the parties to an arbitration agreement agree to refer must consist of a justiciable issue triable civilly. A fair test of this is whether the difference or dispute can be compromised lawfully by way of accord and satisfaction. An arbitral tribunal is a creature of the parties’ agreement. It does not possess the general jurisdiction of the courts. Consequently, where the law reserves a particular question to the courts or another statutory body, private agreement cannot ordinarily confer that jurisdiction upon an arbitrator.”

A dispute is generally arbitrable where it concerns rights that the parties are legally capable of compromising by agreement, and where no Nigerian statute or overriding public policy consideration reserves the determination of the matter exclusively to a court or other public authority.

ARBITRABLE DISPUTES:

Although party autonomy is central to arbitration, parties can only arbitrate rights they are legally free to dispose of or settle privately. Although a valid arbitration agreement makes the Arbitral Tribunal competent to arbitrate the dispute, the dispute can be referred to arbitration only if the subject matter is arbitrable. Accordingly, the extent to which certain types of disputes are arbitrable under Nigerian law is discussed below:

Contractual Disputes

Contractual disputes constitute the classic category of arbitrable disputes. Such as: breach of contract; non-payment; defective performance; delay; termination; repudiation; contractual interpretation; warranties; indemnities; variation claims; damages; construction contracts; supply contracts; distribution agreements; and commercial agency agreements. Accordingly, where the parties have entered into a valid arbitration agreement, and the dispute concerns their contractual rights and obligations, arbitration is ordinarily appropriate.

Construction Disputes

Construction disputes are particularly suitable for arbitration because they often involve highly technical issues such as valuation, variations; extension of time; delay; defective works; payment certificates; liquidated damages; termination; engineering specifications and interpretation of construction contracts. Indeed, the Supreme Court’s decision referred to above arose from a construction dispute.

Commercial, Investment, Banking and Financial Disputes

Disputes involving investments, financing arrangements, concessions, joint ventures and other commercial relationships will generally fall within the broad commercial sphere contemplated by the AMA 2023, especially given that Section 91 of the AMA expressly includes investment, financing, banking, insurance, concessions, joint ventures and industrial or business cooperation within its definition of commercial relationship.
Thus, disputes between commercial parties concerning this wide range of financial transactions may generally be arbitrated where the dispute concerns contractual obligations such as loan agreements, facility agreements, guarantees, financial advisory agreements, banking services, investment management agreements, and contractual payment obligations. The fact that a dispute arises within a regulated sector does not automatically make it non-arbitrable. The crucial question is whether the claim concerns a private contractual right or a matter which legislation reserves to a public regulator or court.

Insurance disputes

Commercial insurance disputes may also be arbitrable, subject to the terms of the applicable legislation and policy; such as interpretation of policy provisions, coverage, indemnification, claims handling, contractual exclusions, and payment obligations, may ordinarily be suitable for arbitration where the relevant arbitration agreement is valid.

Intellectual property disputes

Certain contractual intellectual-property disputes can be arbitrated. For example, parties may arbitrate disputes concerning licensing agreements, royalty payments, technology-transfer agreements, contractual use of intellectual property, confidentiality, contractual restrictions on exploitation; and commercialisation arrangements.

However, caution is necessary where the relief sought would require a tribunal to exercise a statutory or public function, particularly where the dispute affects the status or validity of such intellectual property rights against the world at large. Where a statute or public policy explicitly grants exclusive jurisdiction over a specific matter to a court or statutory body (e.g., validity of registered intellectual property), party consent cannot override the law to give an arbitrator power over that subject matter.

Employment disputes

Employment disputes require careful analysis as a distinction needs to be drawn between contractual employment disputes and statutory employment disputes. A contractual dispute between parties concerning obligations contained in an employment agreement may potentially be arbitrable, provided that the applicable legislation does not reserve the matter to a court or specialised statutory tribunal. Disputes arising from statutory employment rights may be subject to mandatory statutory procedures or jurisdictional rules. Accordingly, it is unsafe to state categorically that all employment disputes are arbitrable.

NON-ARBITRABLE DISPUTES:

Although contracting parties have the autonomy to refer their disputes to arbitration, the subject matter of such arbitration agreement must be arbitrable. Non-arbitrability generally arises where private adjudication would interfere with criminal justice, public revenue, legal status, statutory jurisdiction, public policy, rights of third parties, or the exclusive functions of the courts or public authorities.
Criminal Matters and Allegations of Fraud
Nigerian law strictly prohibits the arbitration of criminal matters, as an arbitral tribunal lacks the inherent jurisdiction to determine criminal guilt or impose punitive sanctions. This fundamental prohibition stems from public policy, as penal matters fall within the exclusive constitutional domain of the courts.

In the locus classicus case of K.S.U.D.B. v. Fanz Construction Ltd, the Supreme Court affirmed the settled categories of non-arbitrable matters as follows:

“The following categories of matters cannot be the subject of an arbitration agreement and therefore cannot be referred to arbitration: –

(a) an indictment for an offence of a public nature;

(b) disputes arising out of an illegal contract;

(c) disputes arising under agreements void as being by way of gaming or wagering;

(d) disputes leading to a change of status, such as a divorce petition;

(e) any agreement purporting to give an arbitrator the right to give judgment in rem.”

Similarly, in Mekwunye v. Lotus Capital Ltd & Ors, the Court of Appeal re-emphasised the public policy limits governing arbitrability, noting that:

“… it has however been judicially recognised as a matter of public policy that matters relating to crime, matrimonial causes, winding up of a company or bankruptcy are of such nature that cannot be settled by arbitration.”

Arbitrability of Fraud Allegations

Historically, early Nigerian jurisprudence often cited a rigid proposition that any allegation of fraud automatically stripped an arbitral tribunal of jurisdiction. Modern jurisprudence, however, adopts a far more nuanced approach.

As established in Mekwunye v. Lotus Capital Ltd, a mere allegation of fraud arising within a commercial dispute does not automatically render the underlying contractual dispute non-arbitrable or oust the tribunal’s jurisdiction. Instead, arbitrability turns on the precise character and target of the fraud allegation:

• Fraud Concerning Contractual Performance: Where the fraud allegation relates directly to the performance or inducement of the underlying contract, such as a party fraudulently misrepresenting its financial position to induce execution or breaching a contractual warranty, the dispute remains arbitrable as part of the broader civil claim.
• Fraud Impugning the Arbitration Clause: Conversely, where the fraud directly attacks the validity or execution of the arbitration clause itself (e.g., where the arbitration agreement was forged or procured by fraud and thus never came into existence), a fundamental jurisdictional threshold is raised. Because the tribunal’s mandate stems strictly from a valid agreement, such threshold challenges must be determined prior to or alongside jurisdictional inquiries.

Ultimately, a bare plea of fraud in a commercial setting does not destroy arbitrability. The critical question is whether the allegation requires the tribunal to exercise exclusive criminal jurisdiction reserved for the courts, or merely requires it to assess civil liability and measure damages for breach of contract.

Matrimonial Causes and Disputes Affecting Legal Status

The Matrimonial Causes Act expressly provides that a person may institute a matrimonial cause under this Act in the High Court of any State of the Federation. This provision clearly excludes arbitral tribunals from adjudicating matrimonial causes. Additionally, a private arbitral tribunal cannot grant a divorce that changes a person’s legal status. This follows the principle in K.S.U.D.B. v. Fanz Const. Ltd., the Supreme Court, per Abdul Ganiyu Olatunji Agbaje, J.S.C., where disputes leading to a change of status, such as divorce, were treated as unsuitable for arbitration. The same reasoning may apply to other disputes where the principal relief sought would determine a legal status rather than merely resolve private contractual rights. Family law matters such as child custody similarly present non-arbitrability issues because of their statutory and public-interest dimensions. Contemporary Nigerian comparative guidance treats matrimonial and family-law disputes as generally outside the scope of arbitration.

Tax Disputes

Tax disputes are among the most important and controversial areas of non-arbitrability in Nigeria. Nigerian appellate decisions have generally treated disputes concerning tax liabilities and government tax revenue as non-arbitrable because they fall within the court’s purview. A leading judicial authority is ESSO Exploration & Production (Nig) Ltd & Anor v. FIRS & Anor, per Emmanuel Akomaye Agim, JCA, where the Court of Appeal held as follows:

“It is glaring from the questions raised for determination, and the reliefs claimed for in the originating summons that the said suit challenged the jurisdiction of the arbitral tribunal to entertain the arbitration proceedings and make an arbitral award therein on the ground that the tax dispute referred to arbitration is not allowed by law to be settled by arbitration, that the Arbitral Tribunal has no jurisdiction to entertain such proceedings and make any award in respect of the tax dispute.”

The rationale is that taxation is imposed by law. A taxpayer cannot simply contract with another private party to determine the amount of tax legally payable to the state. Consequently, an arbitral tribunal generally cannot replace the statutory mechanisms created for determining tax liabilities.
Imperatively, under section 141 of the Nigerian Tax Administration Act 2025, tax disputes can be amicably settled between the taxable person and the relevant authority, except if the action by the taxable person concerned leading to the ‘dispute’ involves wilful evasion of tax or fraud.

There is, however, an important distinction between a dispute about the amount of tax legally payable to the government and a contractual dispute between commercial parties concerning how a tax burden is to be allocated between them.

The distinction has generated substantial academic and judicial debate. For example, parties may agree contractually that one party will bear certain taxes or reimburse another party for particular tax liabilities. A dispute about the contractual allocation of that economic burden may be materially different from a dispute asking an arbitrator to determine the applicable tax liability. Therefore, practitioners should avoid treating every dispute containing the word “tax” as a non-arbitrable dispute.

Winding-Up and Insolvency Matters

A winding-up order has consequences extending beyond the immediate parties. It affects creditors, shareholders, employees, regulators, tax authorities, the company itself and other third parties. It is therefore fundamentally different from an ordinary commercial dispute. The prevailing Nigerian approach treats winding-up proceedings as matters for the courts rather than arbitral tribunals.

The Companies and Allied Matters Act 2020 (as amended) also imposes court-supervision requirements in relation to winding-up. Section 570 of the Companies and Allied Matters Act (CAMA) 2020 expressly grants jurisdiction to the Federal High Court in winding-up proceedings. Also, section 580 of CAMA states as follows:

“If a winding-up order is made or a provisional liquidator is appointed, no action or proceeding shall proceed with or commence against the company except by leave of the Court given such terms as the Court may impose.”

This provision addresses the commencement or continuation of proceedings against a company once a winding-up order has been made or a provisional liquidator appointed. This does not therefore mean that every dispute involving a company in financial distress becomes non-arbitrable. For instance, a contractual debt dispute or a creditor’s private claim may still be capable of arbitration. The critical distinction is between a private dispute involving debt recovery through other channels such as arbitration and a creditor’s petition for winding up of the company, which would ultimately affect the legal status of the company.

Bankruptcy and Insolvency

Bankruptcy-related matters are also non-arbitrable where the tribunal would effectively be required to exercise powers reserved for the court under applicable laws. The underlying reason is similar to winding-up: insolvency proceedings affect a wider class of persons and could significantly impact the legal rights of such persons as well as the legal status of the company. However, a distinction should be drawn between an ordinary contractual dispute involving an insolvent company and the actual insolvency or bankruptcy proceeding or disputes arising from the provisions of CAMA. The former may remain arbitrable; the latter may fall within the exclusive domain of the court.

Illegal Contracts

Disputes arising out of illegal contracts are generally non-arbitrable. The reason is partly hinged on public policy. Parties cannot use arbitration to give legal effect to an agreement that is illegal under applicable laws. This principle was expressly recognised in the traditional Supreme Court formulation in K.S.U.D.B. v. Fanz Const. Ltd. Thus, the existence of an arbitration clause cannot be used to circumvent mandatory requirements for the legality of contracts under applicable laws.

Similarly, public policy imposes a vital limitation on arbitrability. Arbitration cannot be used to give legal effect to transactions, claims, or outcomes that Nigerian law deems contrary to public interest or foundational legal policy. These public policy considerations become particularly paramount in disputes involving statutory duties, regulatory oversight, or criminal liability – being matters where the state retains exclusive authority to enforce compliance and protect the public interest.

Judgments in Rem

One of the most important conceptual limitations concerns judgments in rem. A judgment in personam generally determines rights between the parties before the court. A judgment in rem, by contrast, determines a status or right with effect against the world generally. An arbitral tribunal, deriving its jurisdiction from the parties’ agreement, generally cannot make a decision that binds the entire world, including persons who never agreed to arbitration. This principle is particularly relevant to disputes involving legal status, certain property rights, corporate status, matrimonial status, and other rights affecting third parties.

Land Disputes

It is sometimes stated broadly that land disputes are non-arbitrable in Nigeria, as sections 39 and 41 of the Land Use Act confer on the court of law jurisdiction over land disputes. However, the proposition requires caution. Not every dispute concerning land is necessarily identical. There is a significant difference between a contractual dispute arising from a land transaction and a claim requiring a determination of title to land with consequences extending beyond the parties.

For example, parties may agree to arbitrate certain contractual disputes concerning: construction, development obligations, leases, payment, contractual breaches, or obligations under a property-development agreement. However, where the principal relief sought involves a determination of proprietary status or a judgment whose effect extends beyond the parties, the question of arbitrability of such dispute becomes a major threshold issue. The safer legal approach, therefore, is to examine the claims and consider what right the tribunal is being asked to determine and what legal effect the resulting award would have.

Election Disputes

Election disputes are generally regarded as unsuitable for ordinary private arbitration. The reason is particularly compelling: an election is not simply a private dispute between two contestants. Election litigation implicates the electorate; political parties; constitutional rights; public office; electoral institutions; and the legitimacy of government.

Nigeria’s electoral framework establishes specialised procedures and tribunals for election petitions. Accordingly, it is not legally permissible to substitute arbitration for the constitutionally and statutorily prescribed electoral adjudication process.

Constitutional and Public-Law Matters

Questions involving the exercise of sovereign or public authority may also be non-arbitrable where their determination is reserved to the courts or another public institution. Examples include disputes requiring determination of constitutional validity, exercise of statutory powers, public office, regulatory authority, criminal responsibility, or rights affecting the public generally.

The participation of a government agency or public corporation does not automatically render a dispute non-arbitrable. For example, a government-owned entity may enter into a commercial construction, procurement, financing, or energy contract containing an arbitration clause. A dispute concerning contractual performance may be arbitrable. The distinction is therefore between the commercial “contractual” capacity of the government and its exercise of governmental, statutory, regulatory or sovereign authority.

This distinction is especially critical in construction, energy and infrastructure disputes. When a state actor acts in its purely sovereign, statutory, or executive capacity, its actions are governed strictly by administrative law and public policy, subject to judicial review and existing limitations under the doctrine of separation of powers in accordance with applicable laws. The exercise of such authority cannot be questioned or reviewed by an arbitral panel. By contrast, when a state entity enters into a private commercial agreement (e.g., a construction agreement, a joint venture agreement, etc.), it acts jure gestionis (in a commercial capacity). In such cases, the entity cannot rely on its governmental status to evade contractual liabilities or an agreed arbitration clause.

Such a dispute will be arbitrable with the government as a party to the arbitration. However, disputes where the validity of procurement procedure or lawfulness of exercise of statutory or administrative powers under the Public Procurement Act or other applicable laws are being challenged are not suitable for arbitration.

When to Raise the Question of Arbitrability

The question of arbitrability is dynamic and can be raised at four distinct stages of the dispute resolution process:

• Pre-Arbitration Stage: A party may apply to the court to stay judicial proceedings or seek injunctive relief on the ground that the dispute is non-arbitrable as a matter of law.
  
  
• Pending Arbitration (Tribunal Stage): A party may raise a preliminary objection before the tribunal, challenging its jurisdiction under the principle of kompetenz-kompetenz.
  
  
• Post-Award / Setting Aside Stage: A party may apply to the court to set aside the award under Section 55 of the Arbitration and Mediation Act (AMA) 2023 on the basis that the dispute falls outside the permissible scope of arbitration.
  
  
• Enforcement Stage: Most critically, during proceedings for recognition and enforcement of an arbitral award, the court may refuse enforcement if the subject matter is non-arbitrable under Nigerian law or if enforcement would violate public policy. Notably, a tribunal’s initial finding that it possesses jurisdiction does not bind the court at the enforcement stage. The court retains an independent statutory mandate to evaluate whether the underlying subject matter was arbitrable.

Arbitrability is therefore far more than an academic inquiry. It directly dictates whether an arbitral award will survive judicial scrutiny. Initiating proceedings on a non-arbitrable matter risks wasting significant time and resources on an award that remains inherently unenforceable. Consequently, parties and counsel must rigorously assess subject-matter arbitrability at the pre-dispute and drafting stages, rather than treating it as an afterthought once an award has been rendered.


CONCLUSION:

Investors accord great value to the availability of effective dispute resolution mechanisms and consider them reliable alternatives to the court system. The Nigerian law of arbitrability is founded on a balance between party autonomy and fair and equitable administration of justice. The Arbitration and Mediation Act 2023 strongly supports arbitration as a mechanism for amicable resolution of commercial disputes. Nevertheless, arbitration is not a universal substitute for adjudication, especially as arbitral awards are to be recognised and enforced in the court of law.

However, it is not in all circumstances that disputes subject to an arbitration agreement are arbitrable. The principal rule is that commercial and contractual disputes which concern private rights capable of lawful compromise are generally arbitrable. Conversely, disputes are likely to be non-arbitrable where they involve criminal liability; matrimonial status; certain family-law matters; illegal or void transactions; statutory tax liabilities; winding-up; bankruptcy or collective insolvency processes; election petitions; constitutional or public-law questions reserved to the courts; judgments in rem; or other matters subject to exclusive statutory jurisdiction and decisions of the Nigerian apex court are of the above view.

The Supreme Court’s decision in K.S.U.D.B. v. Fanz Const. Ltd remains one of the foundational authorities for the principle that a dispute referred to arbitration must be a justiciable civil matter capable of lawful compromise. Simultaneously, more recent jurisprudence, particularly Mekwunye V. Lotus Capital Ltd & Ors demonstrates that Nigerian courts increasingly favour a nuanced, rather than mechanical, approach to arbitrability. A commercial dispute does not become non-arbitrable merely because it contains allegations of fraud or touches upon a regulated subject. The court must examine the true nature of the dispute, the relief sought, the applicable statute and the effect of the proposed award.